Ethical Compensation Dilemmas

Read the following dilemmas and then present your decision. Use the following questions to reach a decision:

1. Does the action involve intentional deception?

2. Does the action purposely benefit one party at the expense of another?

3. Is the action fair and just to all concerned? The Golden Rule not only dictates that we "do unto others as we would have them do unto us" but also commands that we treat others as we might wish to be treated.

4. Would the manager feel comfortable if the action were made public or must it remain a secret?

5. Are managers justifying the action by telling themselves that they can get away with it or that they won't need to live with the decision's consequences?

6. Would the decision maker recommend the action to other managers or firms?

1. Jim is given an extremely large raise because of his superb work record one year. As a result, he is currently earning $50,000 whereas others at the firm holding the same job are earning $45,000. Everyone expects Jim to continue to excel and enhance the entire unit's productivity. Unfortunately, Jim's performance drops off after the first year and is now just average. What should be done about his pay? Should it be reduced to reflect his current performance?

2. One year, Ethan's performance is truly spectacular (just as good as Jim's had been in the previous case). However, the company has no raise money available that year so no one, including Ethan, receives a merit raise. Is this appropriate?

3. When Mary was hired, she was told verbally that she would receive a raise when she finished her college degree and yet another raise when she was given additional responsibility. She accepted the job offer based on this understanding. However, during the next two years, the firm experienced slow sales and had to ask all factory employees to accept a 12% pay decrease. But Mary, who does not work in the factory, has finished college, and has accepted more responsibility. Should she receive a raise?

4. Sue is a 55 year old employee of Company A. Her children are out of college and her parents have both died. Company A offers a child care program to all employees along with an elder care program. However Sue, like many other employees, has no need for these services, neither now or in the future. Should the firm retain these programs? Should alternative benefits for employees who have no use for such services be offered?

5. Helen works as an accountant for a firm in the textile industry. During non-working hours, she does extensive volunteer work for the American Red Cross, Meals on Wheels, and the American Heart Association. Helen's employer wants to maintain a favorable image in the community so it wants every employee to donate money to the United Way. Should the firm pressure Helen to donate money? Keep in mind that if Helen doesn't donate money, other employees may not either, which could result in the firm having an unfavorable image in the community. On the other hand, Helen already donates time, which has a monetary value, and she may feel that it is unfair to be asked to donate even more.

Solution Preview

1. It will be ethical and fair to reduce Jim's pay to reflect his current performance, due to the fact that if he is performing at the same level as everyone else, then he should be paid at the same level as the other employees within his department. In addition, reducing Jim's pay would make extra money available to reward any other employee that enhances the unit's productivity due to their outstanding job performance.

2. I believe that the company must carefully monitor its financial standing so if there is no money ...